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Remembering Yalta

Remembering Yalta

­The purpose of this paper is to discuss a theory being talked about in the United Kingdom regarding President Donald Trump’s possible plans for his relationship with Russia. At first glance this plan is so absurd as to be laughable. However, given that we are now living in Donald Trump’s world, and given his unpredictability and his lust for chaos and the dramatic, it might not be quite so laughable after all.


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By now, it is crystal clear that Trump, aided and abetted by Steve Bannon and Steve Miller, are intent on blowing up the existing world order and, so far, they are doing a pretty good job of doing just that.

However, one big question still haunts us. How do they plan to deal with Russia?

A few days ago, I heard a discussion on TV by a British journalist who referred to Trump’s possible plan as the Yalta plan. The discussion was quite brief and she was very sketchy on details. However, she did say enough to pique my curiosity and to allow me to fill in some of the blanks. And, on my own, I have tried to fill in a few more blanks.

I have concluded that while the plan is very far-fetched and, hopefully unlikely to go anywhere, it does have a certain rationale which could definitely appeal to Trump and Messrs. Bannon and Miller.

Let’s begin by looking at the current state of play in Trump’s world.

First, while Trump has been extremely critical of many countries and transnational alliances across the world he has, in most cases, adopted a somewhat laissez faire attitude about their roles and their importance in the world scheme of things. While he continues to make threats and condemn everybody and everything, his bark has actuality been much worse than his bite.

For instance, he says the United Nations is nothing more than a “club” for “people to get together, talk and have good time”. He has expressed doubts about the worth of the European Economic Community saying he “does not care about the EU’s future”. He also said “I don’t think it matters much for the United States”. He has threatened to withdraw support of NATO because it is obsolete and a free loader. He has trashed NAFTA and vows that he is against any multilateral trade deals preferring to enter into deals with individual countries where, presumably, he feels the United States would have the upper hand. Remember, he loves to make deals where he is always the winner.

Admittedly, he has withdrawn from the Trans Pacific Partnership Trade deal and, recently, introduced a crude and bungled ban on Muslims. However, beyond these two initiatives, he has been all talk and little action.

I think it is increasingly clear that Trump feels that this array of transnational institutions and alliances are impediments to his goal of not only making America great again but in maintaining world dominance. To him, these institutions and alliances are not just an irritant but are dispensable and can be cast aside if it suits his purposes.

Having said all this, it is of course very strange that he has remained so quiet on China. During the campaign, China was a constant target of his litany of complaints bur since the election not so much. More significantly, he is doing some things which play directly into China’s hands. His withdrawal from the Trans Pacific Partnership Trade deal opens the door for China to move into the vacuum he created and become the dominant trading country in the Far East. For the time being, however, his approach to relations with China is very passive and, strategically, this could prove to be a huge mistake down the road. Nevertheless, for whatever reason, he has chosen not to join battle with China at this time.

But, the strangest thing of all is his treatment of Russia which, to say the least, is most puzzling. At the moment Russia in his eyes can do no wrong whether hacking U.S. election data, stirring up trouble in the Ukraine, cuddling up to Hungary, etc. etc. Admittedly, Nikki Haley gave a strong speech in the UN condemning Russia’s incursion into the Ukraine. However, heretofore, Trump has been mostly silent on this issue and he has yet to make any strong statement endorsing her views.

His profuse praise of Putin is also strange. This admiration certainly creates the impression that he is very envious of the power Putin wields and wishes he had the same power. Members of his own party are reminding Trump that Putin is an autocrat and a killer but this seems to have no impact on Trump’s admiration for the man. Surprisingly, he recently made a comment on Fox News implying that there is a moral equivalency between the U.S. and Russia and that remark is causing uproar.

Not surprisingly, speculation is again rife that Putin has some embarrassing information from Trump’s past.

All of this love-in is happening despite Putin’s well known determination to do whatever is necessary to become a world power. If Trump’s aim is to “make America great again”, Putin’s aim is to “make Russia great again” even though that status was largely illusionary in days gone by. High on his list of priorities is his goal to resurrect the USSR thereby once more giving him political control of many eastern European and Balkan countries.

Next, it must be remembered that under the U.S. Constitution the President has considerable power when it comes to foreign affairs and can take considerable action without requiring approval or ratification from Congress. This is particularly true of non-military actions. Therefore, if he wishes to reshape America’s international relationships to his own liking, there is little to stop him.

Finally, when trying to determine Trump’s intentions, it is necessary to take the measure of the man. Here, we have a number of clues which certainly ring alarm bells.

He very much wants to be loved by everybody and goes to great lengths to prove to himself this is true. Next, he is an extreme egotist and cannot conceive of being accused of being wrong. To the contrary, he believes he alone can make anything happen and that, therefore, he can cure all the world’s problems. Finally, he sees himself as a pivotal player on the world stage and, in my view, is determined to create a memorable legacy for himself in the history books.

So, where does all this lead to? I believe that looking at all the available evidence he is intent on reaching a detente with Russia as a major priority in achieving his goals.

I believe he has convinced himself that reaching a detente with Russia would be a landmark achievement which would guarantee world peace for years to come. Ergo, he would become a hero in everybody’s eyes and everyone would love him.

The question becomes, therefore, how would he plan to do it?

It is this question that has given rise to the theory that is going the rounds in the United Kingdom. And, this is the link to Yalta.
Those of us in our golden years remember Yalta. We remember that Winston Churchill, Franklin Roosevelt and Joseph Stalin met in Yalta in early February, 1945 to “shape a post second world war peace”. We remember that they signed an Agreement to politically carve up Eastern Europe and the Balkans which basically partitioned these countries from Western Europe. Finally, we remember that in the long run the consequences of that Agreement were disastrous.

As we know, Germany was divided into two countries. Berlin was divided into four sectors and placed under the control of four separate countries. Stalin was given oversight authority over a number of Eastern European and Balkan counties and promised to hold free elections but soon reneged on this promise and created the Soviet bloc of satellite nations. He then imposed authoritative communism on these nations. The USSR, as it became known, alienated itself from the rest of the world and the Cold War was born. The divide between most of the Western world and the Soviet empire was complete and each group felt they were entitled to govern without any obstruction or criticism from the other group.

This was the sad outcome of the Yalta accord.

Remember as well, that throughout this period the people living in the USSR lost their freedom and suffered from a very poor standard of living. As well, their countries fell behind the western world economically and this perpetuated their plight.
So, all in all, this effort by a strong leader to hive off a significant part of the world was an absolute disaster.
This brings us back to Mr. Trump and his intentions.

Certainly, he is unable to enter into any formal agreement like the Yalta Agreement. But there is a concern that given the latitude he has under the U.S. Constitution, he could reach an “accommodation” with Mr. Putin, which would embody many concepts from the Yalta Agreement and thereby accede to Putin’s objective to achieve his own goals.

In effect, he would say to Mr. Putin…..“If you stay out of my back yard, I’ll stay out of yours”. Effectively, he would stand aside and give Putin a blank cheque to pursue his goal of political expansion just as Stalin was able to do.

Under this arrangement, each country would be free to pursue their own agendas without interference or obstruction by the other. They would be able to pursue their own political and economic but hopefully not military objectives, in jurisdictions of their own choosing. They would be free to impose or withdraw sanctions. They would be free to enter into alliances with other countries or to create political blocs. In many ways such an arrangement could look like a mini Yalta agreement, partitions and all.

In order to temper the expected negative reaction to such a deal, the two leaders could agree to co-operate on a number of feel -good issues such as fighting ISIL, denouncing torture, attacking child hunger, controlling nuclear proliferation, to name a few possible candidates.

Regrettably, it is more than likely such an accommodation would hold great appeal for the hard core Trump faithful. It could convince the faithful that Trump is a legitimate world leader and someone to be reckoned with on the world stage. It would be seen as weakening the bargaining power of many countries, especially Europe, in trade matters. This would bring cheers from the faithful because it would allow the U.S. to negotiate individual trade deals that impose its terms on its weakened trade partners. It could appease their concerns about the influence of transnational institutions. It would make it easier for the U.S. to further back off any serious attempts at dealing with climate warming. In other words, to the faithful it would Make America Great Again. All of this could be red meat to Trump’s supporters.

Unfortunately, in the long run, it could also give new life to Russia and perhaps lead to an expanded stable of Russian satellite nations ruled by autocratic leaders who could, once again, wreck havoc on an established world order. We must never lose sight of Putin’s grand plan.

Very definitely, such an accommodation would be fiercely condemned by many countries and alienate almost all of America’s allies and supporters. Europeans especially have too many bad memories of the situation that existed for so many years under two regimes and certainly remember the impact of the cold war. They will quickly realize that they are being stranded in between two powerful entities and left to fend for themselves with reduced power of their own. Their situation would be even worse if the EU should collapse or NATO should disintegrate.

The rest of the world would be just as upset. In my view, they would also quickly realize that this new alignment would once again be a real threat to an established world order and object very strongly to such a rearrangement of world affairs.

As I said at the beginning of this paper this whole concept is very far-fetched and is most unlikely to succeed and I agree. However, the fact that people are talking about it, if only in hushed tones, is a cause for concern. Also, given the tenor of Mr. Trump’s remarks in the last few days, we have to worry about his true intentions and this plan in his mind may not be too far-fetched at all.

We can only hope the Republican Party and others will come to their senses and rein Trump in before it is too late.

 

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Is World Order At Risk?

Is World Order At Risk?

In my June, 2016, paper, Globalization At Risk?, I wrote about the impending attacks on this hugely popular economic phenomenon.  Regrettably, many of the concerns I spoke about in that paper have come to pass.

However, this is just one of a litany of significant global issues which are flooding the world scene and creating an unsteady world order.


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You will all recall that following the second world war, the world slowly evolved into a new world order which became known as the Liberal World Order . The developed nations, for the most part, collectively supported policies, treaties and transnational institutions designed to maintain peace, to foster economic prosperity, to protect human rights and, generally speaking, to make the world a better place to live.

As a result, for many decades, the world has enjoyed a period without a major war, economic prosperity unheard of in history, technological advances undreamed of by anybody, and unbelievable medical breakthroughs.

Regrettably, in recent times, a number of new and disturbing issues are now front and center and many of these are threatening the established world order and could quickly destroy much of the stability that protects us in today’s chaotic world. It is even more concerning that these issues are rattling our world concurrently which increases the risk we could face the perfect storm.

As I reflected on the many issues that are in the news these days, it struck me that issues are usually addressed individually and usually in isolation and not as part of the totality of many issues.  Hence, any discussion or analysis usually underplays the impact these issues, when taken together, would have on our world.

A quick review of these issues through this lens makes it very clear that our world is under attack on a multitude of fronts both in the short term and the long term. Further, given this array of issues, it is no wonder that the world is in disarray in trying to deal with them.

This has led me to addressing a number of the issues as a collection of concerns which I believe provides a more realistic portrayal of the dangers we face. I have chosen these particular concerns because I consider them to be overarching concerns which are already disrupting world order.

I have not made any attempt to prioritize these concerns because in most cases they are interdependent or interconnected with many other concerns. As I said earlier, they are all happening concurrently. Also, in many situations, it is impossible to separate cause and effect.

Not surprisingly, the tone of this type of analysis is very negative. Regrettably, when working through the concerns as a totality, it became very difficult to spot anything positive. Indeed, I believe that given the vast number of issues and their connectivity, as I said earlier, there is a growing probability that we could soon end up smack in the middle of the perfect storm. I hope I am wrong.

Here, therefore, are several issues that I perceive to be major overarching and often overlapping concerns:

Anemic World Economic Growth

The world is plagued with very low economic growth and there is every indication this will continue indefinitely. Growth rates hovering in the 1% to 1.5% range will not sustain healthy economies but these are the rates most economists are predicting for a long time to come.

Continuing low growth can lead to severe economic stagnation which, of course, causes many associated problems which in turn can have a snowball effect. Not the least of these problems can be political unrest. There is understandable concern that the ravages caused by long term slow economic growth or the impact widespread economic depressions or economic isolation would have on peoples’ lives would be extremely damaging to world order.

There is considerable debate about the underlying causes of the problem and even more debate about the solutions. Indeed, there does not appear to be any clear cut solution. Certainly, politics play a major role. The foreseeable lack of a breakthrough technology to stimulate demand and the propensity for saving over spending are factors. Further, demographic factors such as low population growth and aging populations are becoming significant factors underlying slow growth.

Unfortunately, if the problem continues, desperate remedies attempted by individual nation states could be counterproductive and exacerbate the problem thereby rendering the road to recovery even more difficult than it may need to be. All in all, low economic growth could continue to be a disruptive factor in maintaining world order.

POLITICAL DESTABLIZATION

Political unrest is rampant in many parts of the world. The United Kingdom; the European Community and individual countries within the European Community such as Italy, Spain, Austria, the Netherlands, and Greece;  Eastern European countries such as Ukraine and Poland; Middle East countries such as Syria and Iraq;  South American countries such as Venezuela and Brazil and, of course, several countries in Africa are all experiencing significant unrest.

Further, given the turmoil following the recent election, I would argue the United States has joined the ranks of those countries where political unrest is alive and well.

Political unrest is happening for different reasons in different countries.

Some countries which are already autocratic, such as Syria and Venezuela, are dealing with civil strife. Countries such as Turkey and Poland are in the process of moving from democracy to a form of dictatorship. Greece is struggling to stay democratic while trying to recover from a bad case of extreme left wing policies.  Still others, such as several European countries, are experiencing a crisis of leadership leaving their citizens in a quandary as to how they should be or want to be governed.

However, the single most significant factor causing widespread political unrest is the wave of populism that is sweeping across the developed world. In some cases this is populism of the left and, in others, populism of the right.

Populism of the left usually leads to social upheaval and weakens the authority of governments. Populism of the right, while it can strengthen the authority of governments, usually leads to an autocratic, even a dictatorial model of government which creates other problems. Either way, millions of people feel disenfranchised or downtrodden and that’s not good.

Currently, in Europe there is already a major tug of war between populism of the left and populism of the right to govern and this is causing much unrest.

As one pundit recently said, “Populism is a wonderful thing until you actually have it” and I believe this tsunami will cause much more harm than good.

In my view, we are sitting on a powder keg of political issues which can not only quickly become more contagious but could suddenly explode in unexpected fashion causing untold damage to world order.

Economic Destabilization

The world is very much on edge as traditional economic thinking is being swept aside in very short order and the consequences are not pretty.

Globalization is under attack. Trade deals are out of favour and protectionism is back in vogue. Intellectual property rights are being trashed. International financiers have become robber barons. The upper management class is reaping unjust rewards. Workers have lost their rights. The very nature of work is undergoing dramatic change. Secure employment is a thing of the past. Golden retirement is nothing but a dream.

There is no single explanation for this state of affairs but there are many causes. More importantly, there is plenty of concern.

Without doubt, very large segments of the population feel that they have been left behind, no longer enjoy the fruits of their labour and will have no security for their old age….and they are frightened and they are mad.

It is no wonder that they are crying out for change and crying out for fairness.

And, it is no wonder that they are making their voices heard in the political arena and, through the ballot box, warning politicians of every persuasion that they mean business. It is increasingly clear that if politicians do not respond to their concerns and if economic unfairness and economic uncertainty persists, they could very well take to the streets.

This would be another nail in the coffin of world order.

Waning Support for Democratic Governance

Our democratic model of governance is under considerable pressure in many places and, in some countries, even under attack and rejection. And, there are signs that this form of government is not necessarily favoured by a lot of people or in some cases even feasible.

In my view, one size does not fit all and this is leading to divergent views brought about by different circumstances.

In many countries, the population is of course already ruled by a dictator or an autocratic form of government and even though they might long to live in a democracy that is not likely to happen unless there is a regime change. In other cases, some countries such as Turkey, Libya and even Iraq have implemented demographic governments but they are now regressing to more autocratic governments. There are a number of reasons this is happening. In the case of Turkey, a strongman has grabbed the reins of power. In Libya and Iraq, culture, religious rivalry, and tribal factions are major obstacles to implementing democratic values. This is the situation in many countries, and they are not ready for a democratic form of government or a democratic form of government is not sustainable.

Finally, and this is most worrisome,  in many advanced countries which already have a well established form of democratic government, recent analysis is showing a worrying drop off in support for this form of government.

In a research paper entitled “The Signs Of Democratic Deconsolidation” and published in the Journal Of Democracy, the researchers conclude that liberal democracies around the world “may be at serious risk of decline”.

Using a number of criteria comparing the 1980’s with the 1930’s,  they state that “across numerous countries, including Australia, Canada, Germany, Sweden, the United Kingdom and the United States, the percentage of people who say “it is essential” to live in a democracy has plummeted”. In Canada, support has gone from 75% to 40%. In the United States, it has dropped from 80% to 30%. Further, the numbers are similar across the other developed countries. Worse, support is now substantially lower among younger people.

Admittedly, this is only one study and more research is needed, especially to examine the causes. However, data from other world studies such as the European and World Values Survey, do support the conclusions in this study.

While this is only one factor in the possible disruption of world order, it is a most important factor and needs to have a prominent place on our radar screen as we go forward.

Growing Mistrust of Intellectuals, Elites and the Media

In a recent interview on CCN, Celissa Ward, a political commentator, said  “Americans have become anti-facts, anti-elite and anti-science”.

This statement certainly rings true in view of what happened during the recent elections in the United Kingdom and the United States. Many, many voters did not believe what they were being told by intellectuals, elites and the media.  Sadly, I think this malaise has also spread well beyond election campaigns and has become part of the everyday mindset of many people.

Throughout the country and especially in rural areas, many people now firmly believe that intellectuals do indeed live in ivory towers and do not understand what is happening in the real world and so cannot be believed.

A large number of people believe the elites live a privileged life and are only focussed on their own desires and self enrichment, and so do not have any creditability when dealing with the travails of the “working” class.

The media, largely because of the rhetoric in the United States’ election, is now viewed as very biased and incapable of being objective and cannot be trusted .

The problem is exacerbated because voters themselves often substitute their own biased views for other people’s opinions. For the most part, voters do not apply any meaningful filters to what they hear or to what they are told. Rather, they react positively to what they want to hear and ignore or reject what they do not want to hear. The inability or unwillingness of voters everywhere to be critical is giving the practitioners of propaganda and false news a free path to do harm.

If the voting population does not exercise any constructive criticism over information flow, voters can be deluged with incorrect facts, ill conceived policy proposals, propaganda and fake news, all of which could be taken at face value and influence voting decisions. Even more concerning, this is a technique which a foreign power, Russia, is already using.

Unfortunately, if these techniques are used as a deliberate strategy to disrupt world order they could be very successful.

Weakening Support for Transnational Institution

As I said earlier, following the second World War, there was concerted effort on the part of many nations to create a global infrastructure to establish a new world order which would foster peace and enhance economic prosperity. Therefore, in the years following the war, hundreds of transnational institutions or treaty organizations have been created for these purposes. These cover a wide range of disciplines such as political entities, military blocs, economic forums, environmental watchdogs, workers rights and trade agreements and come in variety of shapes and sizes.

Any list of the important organizations would include the United Nations, the European Economic Community,  the North Atlantic Treaty Organization, the North American Free Trade Agreement, the Organization For Economic Co-operation and Development, the World Bank, the International Monetary Fund, the International Court Of Justice, the World Health Organization and the International Labour Organization.

Even this short list illustrates the complexity of today’s world order and underscores how interconnected and interdependent world affairs have become. It also emphasizes how necessary it is to have global infrastructures in place to maintain this new world order.

Unfortunately, there are an increasing number of attacks from numerous sources challenging the need for or the effectiveness of many important transnational organizations. The policies of austerity being pursued in so many countries have given the critics an additional argument or excuse, namely that they can no longer afford the luxury of these transnational arrangements.

Brexit certainly lit a fire under the embers that had been smouldering in many places concerning the effectiveness of political and economic blocs. The odds are now much greater that Scotland and Ireland will split from England and join the European Community. The problem is that the European Community itself may no longer exist. Many member states of the community are in political turmoil themselves and actively contemplating leaving the community as populism, nationalism and protectionism become rampant in their countries.

Trade agreements are also increasingly under attack and the trading arrangements that have been negotiated with great difficulty over many years are in imminent danger of becoming undone.

Even more worrisome, some of the most vocal and critical attacks on transnational institutions are now coming from this side of the ocean. The most strident criticism of several transnational organizations is coming from the new Trump government in the United States.

Donald Trump has criticized the United Nations as nothing more than a “club” for “people to get together, talk and have a good time”.

Lately, he has expressed doubts about the worth of the European Economic Community. As recently as the weekend of January 14, 2017, Trump, in an interview with two journalists from the Times of London said he did not care about the EU’s future. He said” I don’t think it matters much for the United States.” He went on to t say “you look at the European Community and its Germany”.

He is also very critical of NATO. He says it is obsolete and a free loader and is in need of a major overhaul if the U.S. is to continue its membership.

He claims that NAFTA has been a disaster for the United States and he plans to get rid of it. He also intends to withdraw from the Trans-Pacific Partnership Trade Deal (TPP). Ironically, he professes to be a supporter of free trade. However, when you look closely at his words and his actions he is really a mercantilist. In his world, there can only be one winner not several winners. As one critic said “he wants to not only keep all the jobs in the U.S. but he wants to take everybody else’s jobs away from them”.

He says the international nuclear deal with Iran is the worst deal ever negotiated by the U.S. and he intends to have the U.S. withdraw from it.

Whether he ever succeeds in following through with his threats is somewhat beside the point. The concern is that he is adding his voice and the voice of the U.S. to the questioning of the current world order without proposing any constructive or meaningful alternatives.

No one will argue that these transnational mechanisms have been overwhelmingly successful or that they have been particularly cost effective. However, it can be argued that they have done many great things to maintain world peace and to foster economic well-being and also to prevent many bad things from happening. If they continue to be underpinned, this will represent a huge rupture in world order and we will all suffer greatly.

Terrorism

There is no doubt that the world will be plagued with terrorism for many, many years to come.

Given the concentrated and co-ordinated efforts now under way, it is at least possible that institutionalized terrorism can be largely wiped out or at least suppressed. Therefore, such organizations as ISIL, Al Qaeda, Hezbollah, Boka Haram and Hamas will eventually be rendered mostly ineffective.

However, it is more than likely that radicalized individuals will remain active and cause havoc in many places. In most cases the damage will not be great but the impact will continue to be heartbreaking. More importantly, their attacks will continue to spread fear and, in far too many places, prompt over reaction. Many nations will limit freedom of movement, take military measures and even build walls in mostly futile attempts to eliminate the threats. For some time, I have been saying that Americans, for example, are in the process of shutting themselves off from the world and becoming prisoners in their own country.

Having said all this, I am concerned that there will be one very insidious fallout while terrorism remains rampant. As I pointed out, terrorism creates fear. There are several recent examples of politicians in several countries using this fear factor for political purposes to advance their causes. This tactic causes considerable unrest in the country and often pits citizens against each other thereby leading to major divisions among the voters.

Exhibit A in this regard, is Donald Trump’s campaign in the recent U.S. election. As we know, using this tactic, he succeeded in creating major divisions across the country and, even after winning the election, he continues to use fear as a motivating technique.

It will be virtually impossible to totally stamp out terrorism because, among other things, it is an effective and cheap form of modern warfare and, when conducted individually or in small groups, it is so diffuse it is difficult to attack. This being the case, in my opinion, we will have to learn how to contain the threat as best we can and minimize its impact on the public at large.

In the meantime, terrorism as an issue will continue to be another thorn in the already vulnerable side of world order.

Increasing Risk of Nuclear Conflict

This is another over arching issue which represents a major threat to world order and we can only hope that sane minds will prevail since this issue shows signs of potentially lurching out of control.

There are a number of factors at play. As we know, the relationship between the U.S. and Russia has been deteriorating and currently is very tense. The U.S. and Russia, both signatories to the Nuclear Proliferation Treaty, have recently announced that they are spending money to modernize their nuclear arsenals. Many countries are suspicious that they are actually spending money to increase their stockpiles. As well, the Russians backed out of recent conferences dealing with nuclear security and have ceased having discussions with the U.S. on various nuclear issues. If this state of affairs continues, the two countries could find themselves in a nuclear standoff with each one trying to out manoeuvre the other to achieve the upper hand.  Matters could easily get out of hand with disastrous consequences.

India and Pakistan both have nuclear weapons but are not signatories to the Nuclear Proliferation Treaty and there are concerns that if their relationship goes completely sour and hotheads prevail, there could be some form of a nuclear confrontation.

If Iran does not comply with the recently signed nuclear agreement, there is concern that the U.S. would not be content with increased sanctions but would withdraw from the agreement thereby leading to another confrontation which could turn nasty. Moreover, if this happens the other countries who are signatories to the agreement could be forced to take sides and this could cause a rift between the U.S. and some of its allies.

And, of course, there is the rabble rousing going on in North Korea. If North Korea should test a nuclear weapon which could reach U.S. shores and China remains on the sidelines, Donald Trump could easily take military action in lieu of imposing more sanctions. If this should happen, things could easily spin out of control into something much more serious.

All in all, the whole issue of nuclear proliferation continues to be a very serious issue and, like terrorism, continues to be a thorn in the side of world order.

Climate Warming

In my view, there is major warfare between the people who truly fear the ravages of climate warming and those who discount its seriousness. It seems to me that this is not so much an argument about whether it’s going to happen or when it is going to happen but about who is at fault and who should bear the responsibility for dealing with it. The people who have an economic interest in keeping control of their traditional energy sources claim there is a lack of proof beyond a reasonable doubt that it is human activity causing the problem and, therefore, their activities should not be curtailed. Those who do not have a direct economic investment at stake, claim there is enough plausible evidence or balance of probabilities to support this connection and this is all the proof needed to justify dramatic and urgent action.

This is the classic legal distinction between a criminal burden of proof and a civil burden of proof and if this continues to form the debate it is most unlikely that anybody will be able to get the two sides on the same page. This being the case, it will fall to governments to take the lead in resolving the dispute. Politically, this is a dynamite issue and, even though most politicians acknowledge it  exists,  in most countries they are staying as far away from the issue as they possibly can. Also, there is a concern that Donald Trump, who is a sceptic about climate warming, will not support the Paris Treaty.

In my view, this issue is so important that we cannot afford to be wrong and we may only have one chance to get it right. Therefore, I come down on the side of plausible cause and believe the world needs to take effective action without delay.

However, since the debate will no doubt continue for some time, this is another issue which will be unsettling to world order.

Putin’s Game Plan

Putin is a trained spy who is obsessed with Russia’s loss of its status as a world power following the breakup of the USSR. Because of his obsession, there is widespread concern that he is using all his wiles learned as a spy in an irrational campaign to restore Russia’s status. Therefore, we can expect he will try a number of things to disrupt world order in an attempt to achieve his objective.

There is a growing amount of evidence to support this concern.  His annexation of Crimea. His military incursion into the domestic affairs of the Ukraine. His involvement in Syria ostensibly to go after ISIL but in realty to prop up Assad’s embattled regime. His downing of a commercial airliner over the Ukraine. His frequent use of his veto in the United Nations to put down proposals that are favourable to other political philosophies. His covert activities to influence political thought and behaviour throughout Europe. His efforts to suppress freedom of thought and freedom of speech in the satellite countries adjacent to Russia. His hacking of computers in several countries to access state secrets. His hacking of computers during the U.S. elections and arranging for a third party to leak private data presumably to assist Trump’s campaign. These are all known examples of the techniques he uses to achieve his goals.

Lately, he seems to be using the “nice” guy approach in certain situations which do not ruffle his core objectives and this has led some people to believe he can be reasonable and possible to deal with. Unfortunately, recent history shows this has not worked with other world leaders or, indeed, with American Presidents who went down this path. Ask Obama and Bush. Regrettably, these attempts have distracted world leaders from focusing entirely on Putin’s long term game plan.

I remain convinced that Putin will never be swayed from his ultimate goal and western leaders must tread very carefully when dealing with him. As the saying goes…”be sure to count your fingers before you leave the room”.  It looks like Trump may be falling into the same trap and this is very worrisome.

Whatever happens, this issue will continue to disrupt world order.

 


CONCLUSION

Despite some bumps along the road, the liberal world order developed after the second world war has served us well. Its focus on lofty goals such as the human condition and fairness for all have become the hallmark of much of today’s society. It would be a shame to dismantle all of this in the face of irrational attacks by irrational people. It would be even more shameful to regress to the world that existed prior to the war.

Unfortunately, many of the concerns are already in full flight and it is going to take considerable will and considerable effort to halt or reverse many of the trends before it is too late. If we cherish our current world order, scabs and all, we need to be a warrior in the battle otherwise we could lose by default.

I am an optimist by nature and I have every confidence we can win the battle. But let’s be very honest with each other. It is going to be a very tough battle.

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The United States Is Not Very United

The United States Is Not Very United

Donald J. Trump, on his journey to be elected President of the United States, tossed many very large grenades into the political fabric of his country. He exposed to the whole world how deeply Americans are divided on so many issues . . . issues where considerable unity and a high degree of common purpose among the electorate is crucial for the smooth functioning of a modern democracy.


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The results of the Presidential election have confirmed how badly the country is divided. In many cases, the opposing views are rather evenly split. In other cases, the results are very lopsided in favour of one view or the other.

While collecting and analyzing the election data for this paper, I also became increasingly concerned that the current model of American democracy is at great risk and that all of us should be very worried even those of us who live beyond the U.S. borders.

But let me begin with an analysis of some of the many divisions currently plaguing the United States before turning to the future.

The following is a list of many of the most obvious demographic differences and other issues where division in the electorate is rampant and not just between staunch Republicans and staunch Democrats but among other major stakeholders in American society.

  • White people vs. people of other colours and races
  • Rural voters vs. urban voters.
  • Men voters vs. women voters
  • Millennial voters vs. Gen X voters
  • Liberals vs. conservatives
  • Religion vs. pragmatism
  • Less educated voters vs. more educated voters
  • Citizenship vs. immigration
  • Free traders vs. protectionists

While the analysis of the November 8th election is still ongoing, there is already sufficient data to draw conclusions on the impact of many of these issues on voting patterns and, hence, the electoral results. Much of the data has been gathered at the exit polls and is, therefore, subject to some further analysis. It should also be noted that the percentages do not always add to 100% due to non-responses to some of the questions.

White people vs. people of other colours and races

It is well known, of course, that there are major political and cultural differences between the white population and people of other colours and races. It was anticipated by many people that because of the shift in the demographics since the last election, this latter group could come together in some kind of an informal voting bloc that would overcome the dominance of the white electorate. This did not come to pass. White voters continued to dominate. Also, unexpectedly the voter turnout by the other groups, particularly African-Americans, was way below expectations. This has been attributed to voter suppression and also Clinton’s failure to address their concerns or to offer new programs or other measures to address their concerns. In any event, this drop off benefited the white population and gave it proportionately more clout.

That being said, the total vote was also low. It is expected to be about 50% of the eligible electorate. That compares to 53.6% in 2012 which has been the historical average for many previous elections.

70% of the total vote was by white voters. Of this number, Trump had 58% and Clinton had 37%. The breakdown of the 30% non-whites was 21% for Trump vs. 74% for Clinton.

So, Trump attracted significantly more white voters than Clinton. However, Clinton attracted more than a third of the white voters. She also had three-quarters of the non-white voters. This shows there is a considerable difference based on race. It also shows there is still a significant bloc of white voters in each camp and each party will have to continue to cater to their needs in any future campaign and this could cause further division across party lines. As well, the Clinton crowd will not only have to work harder to keep the non-white voters in their camp but, more importantly, to get them to the polling booths.

Looking ahead, there is another potentially major factor at play. If Trump puts the lid on future immigration as he has promised to do, the ratio of whites to others could remain more or less the same. It could even increase the ratio of whites. If this happens, the non-whites could feel even more disenfranchised and if they continue to reside on the lower rungs of the economic ladder, this could spell trouble for the white majority. For instance, they could become motivated to create a political bloc of their own.

Rural voters vs. urban voters.

In this election, the gulf between rural voters and the urban voters was very much wider than anyone expected and this split had a major impact on the outcome. And, it should be kept in mind, that in 2014, 81% of the population lived in the cities and suburbs. The migration from the farms to the cities is predicted to continue which means the discrepancy could be even greater by the time of the next election. Some post-election polling in the farm belt shows there was a strong feeling rural folk were being ignored and too much emphasis was being placed on minorities in the urban centers. This view could lead to further feelings of disenfranchisement in the rural communities as they become a minority themselves.

By far the majority of observers agree that Trump won the election because of the rural vote and, since the election, much has been written about this major divide. However, to this point, there is no aggregate data to measure the exact impact but there are 3 states where the results clearly portray that the divide did impact the outcome.

In Michigan, Trump won the election by 13,107 votes. In the Michigan cities, Clinton won 230,000 votes more than Trump. But in rural areas and small towns, Trump won 240,000 more votes than Clinton, enough to carry the State. This is the first time the Republicans have won Michigan since 1988.

In Wisconsin, Trump won by 27,257 votes and even though Clinton outpolled Trump by more than 125,000 votes in the cities, Trump won the State. This is the first time the Republicans have won Wisconsin since 1984.

In Pennsylvania, Trump won by 68,236 votes even though Clinton beat him by more than 215,000 votes in the cities.
As I said, forecasts make it clear that the shift from the farms to the cities is going to continue. As rural voters see themselves becoming a minority and watch their influence diminish, they could very easily decide to organize their own political party and, if they chose to do so, they could wield considerable clout. As we know, when organized, they already have considerable clout on agriculture policies and on trade matters.

As a Canadian, who can forget the United Farmers of Canada which was a political party from 1926 to 1949? And, in 1932, another western Canada political party supported by the agricultural community and known as the CCF was formed. In 1961, it changed its name to the National Democratic Party, and is popularly known today as the NDP. So, it can happen.

Men voters vs. women voters.

It was widely expected that given Trump’s rants and his behaviour, women would support Clinton in droves. It did not work out that way.

White women comprised 37% of the electorate. Surprisingly, of this group, 53% voted for Trump and only 43% voted for Clinton.
It should also be mentioned that Latino voters made up 11% of the electorate. In this grouping, only 62% 0f the men and 68% of the women voted for Clinton. That means that about one-third of the Latino voters supported Trump which is many more than predicted.

Once again, these results show that women and Latino voters are deeply divided, and much more so than anticipated. These results also suggest that today a number of factors are involved in the voters’ decisions and that the outcome is no longer played out primarily along party lines. Quite often voters become caught up in other causes which take precedence over party loyalty even if it means crossing party lines.

Millennials vs. Gen Xers

It was anticipated that, on the assumption Millennials represented a higher percentage of the population this time, they would play a more pivotal role in the election and this would help Clinton. Not so.

In the 18 to 29 age group, which represented 19% of the electorate, 55% voted for Clinton and 37% voted for Trump. In the 30 to 44 age group, which represented 25% of the electorate, 50% voted for Clinton and 42% voted for Trump.
Both in terms of the demographics and the percent of votes, these results were not very different from the results in the 2012 election. In that election, the 18 to 29 age group, which also represented 19% of the electorate, 60% voted for Obama and 37% voted for Romney. In the 30 to 44 age group, which represented 27% of the electorate, 52% voted for Obama and 45% voted for Romney. So, despite the expectations, the Millennials did not vote overwhelmingly for one candidate or the other but, nevertheless, remained divided, often quite deeply.

The question becomes….what will happen in the next election because there is a general belief that Millennials will demographically become a larger segment of the population?

In my view, this is not a certainty. North American birth rates have continued to decline for some time, and even in the short term, there will be proportionately fewer young people. So, sooner rather than later, the balance could well shift to older people who, of course, have very different views on many things. Further, if Trump clamps down on immigration, this will have a very dramatic effect on the country’s demographics. For instance, younger immigrants of military or near military age will not be very welcome because in Trump’s world they will be perceived as terrorist threats. Also, as other countries develop, there will be opportunities in those countries to keep young people at home.

If this is the case, the demographics for Millennials could change and their influence, unless they take action, could even decline.

Liberals vs, conservatives

These labels no longer have the same meanings they traditionally had and, in my view, are now virtually meaningless and, worse, misleading.

Today, a “conservative” can be anybody from a moderate progressive, to an adherent of the Tea Party, to a devotee of the Alt.right movement. A “liberal” can be anyone from a fiscal conservative to a socialist.

Under the cloak of the Republican banner, Trump at times claimed to be a conservative but he is anything but. I doubt that he has read the Republican Party’s platform or would understand it if he did. Cruz is a strong supporter of the Tea Party but has been trying to keep that under wraps these days. Steve Bannon is the flag bearer for the Alt.right and a self-proclaimed white supremacist. All these people continue to portray themselves as good old fashioned conservatives which is certainly a misnomer. Bernie Sanders portrays himself as a liberal under the Democratic banner but he is a socialist through and through.

Another thing happened in the campaign. The candidates largely avoided the terms liberal and conservative to describe themselves. They also avoided the terms Democrat or Republican.

Instead, they adopted an approach to promote themselves not their party. In other words, their own name became their brand. You may have noticed that most of the TV ads featured the candidate and his or her name only. There was seldom any mention of the party unless the ad was being aired by the party itself. In this way, the candidates hoped to avoid being associated with their party or their leaders or with any other political labels for that matter.

I’m not sure this worked to the extent they hoped it would. To the contrary, it probably left the poor voter more confused than ever. Beyond confusing the voters, I doubt it is an issue weighing heavily on voters’ minds but it does open the door for voting blocs void of any identity or affiliation with the old line parties.

Less educated voters vs. more educated voters

There are a number of results that try to slice and dice this category of voters. The following numbers provide one overview.
College grads in total voted 52% for Clinton vs. 43% for Trump. Voters without college degrees voted 44% for Clinton and 52% for Trump.

White college grads voted 45% for Clinton and 49% voted for Trump so the difference was not that great. But, when it came to white voters without a college degree, the difference was substantial i.e. 28% for Clinton and 67% for Trump.
When it came to non- white voters, the differential was very significant for both voters with a college degree and voters who did not have a college degree. For non-white voters with a college degree, 71% voted for Clinton and only 23% for Trump. For non-white voters without a college degree, 75% voted for Clinton and just 20% for Trump.

When it comes to women, white women with a college degree voted 51% for Clinton and 45% for Trump. White women without a college degree, voted 34% for Clinton and 62% voted for Trump.

Based on these results, which I know can be confusing, it is difficult to draw very many general conclusions save that non-white voters, whether with a college degree or without a college degree, voted overwhelmingly for Clinton. Her problem was that enough of them did not turn out to vote.

Religion vs. pragmatism

The exit polls produced very little information about the role of religion in the election or how divisive it was across the electorate. However, the exit polls did produce the following data about one religious segment which was very informative.

According to the poll, 26% of the electorate identified themselves with the born again and evangelical Christian religious faiths and this was a not insignificant percentage of the total electorate. In this segment, 16% voted for Clinton and 81% for Trump. It is surprising, given Trump’s moral shortcomings during the campaign, that he would enjoy this much support compared to Clinton. One can only conclude that the voters decided Trump’s transgressions were considerably less serious than Clinton’s transgressions. Also, given the fervor of these religions, it is surprising that so many of the faithful were even prepared to forgive and forget.

Citizenship and immigration

As we know, the moment Trump threw his hat into the ring, the issue of immigration became the centerpiece of his campaign and dominated the discussions and debates until election day.

This issue is so complex and there are such a variety of models on the table that it almost impossible to find many meaningful aggregate statistics. Moreover, the information coming from the 2016 election exit polls is very scant. However, the few numbers that are available confirm that the Americans remain very divided on 2 issues.

On the question of legal status for immigrants, 70% of the electorate favour granting legal status to immigrants. Of this number, 60% are Clinton supporters and 34% support Trump. However, the differential is very different among the remaining 30% who want immigrants deported to their home countries. Here, only 14% of Clinton supporters favour this approach whereas 84% of Trump are in support. Unfortunately, the results do not make any distinction among documented immigrants, undocumented immigrants or immigrants who have committed a criminal offence.

On the question of the wall between Mexico and the U.S., 40% support it and 54% oppose it. For supporters of the wall, only 10% are Clinton supporters whereas 80% are Trump. For opponents of the wall, 76% are Clinton supporters and 17% are Trump supporters.

Free traders vs. protectionists

This debate was another hot button issue during the campaign. Certainly, most voters understood there were winners and losers but it was also a very complex issue for individual voters to understand. As is the case with so many of these very complex issues, voter literacy was a major problem. To sell your point of view, It is very difficult to come up with sound bites that are educational as opposed to inflammatory. Therefore, it was almost impossible to undo the rhetoric of the protectionists especially when two of the presidential candidates weighed in on the protectionist side. Eventually, because of the campaign rhetoric, most voters concluded there were more losers than winners because of free trade agreements.

So far, the data coming from the exit polls is very limited. The only major finding related to jobs.

The exit polls found that 38% of the electorate believed the trade agreements created jobs, 42% felt they took away jobs and 11% said they had no effect on jobs. In the first group, 59% were Clinton supporters and 35% Trump supporters. In the second group, 31% of Clinton supporters believe the agreements took jobs away but a much greater number of Trump supporters, namely 65%, believed this to be the case.

There are several recent opinion polls, not related to the election results, which provide some additional perspective on this controversial issue. As you might expect, there were literally hundreds of polls conducted over the past several months, some credible and some not so much, and, if one searches long enough, you can find a poll which supports your personal point of view. Also, some polls only skim over the surface and can be misleading. For instance, a couple of polls found that people were very supportive of free trade but when asked were very opposed to the free trade agreements and that skewed the findings.
But some of the credible recent polls do present an overview of the voters’ thinking.

In general, they show that the American electorate continues to strongly support free trade. In September, 2016, well along in the campaign, the NBC News/Wall Street Journal poll found that 55% of the electorate felt free trade was good for the country and 38% felt it was bad. Another recent credible poll (The Chicago Council On Public Affairs) found in September, 2016 that 65% favour free trade and 34% do not. Although Americans still favour the Trans Pacific Trade deal, support is 60%, down from 64% a year ago.
Finally, polls show that in the past 10 years, support for free trade among Democrats has increased while support from Republicans has declined. This seems odd since, up until this election, the Republican platform has always been strongly in favour of free trade.
So, on this very important issue, the U.S. electorate is not only divided but I suggest very confused.
In summary, as I said at the beginning of this paper, the U.S. electorate is badly divided on a great number of important issues. As well, the American political system has become very fractured.

After digesting the flood of data and opinion coming out in the aftermath of the 2016 election, it is my view that one fundamental pillar of the U.S. democratic model is very much at risk. I believe that the shelf life of the two party system has become very much shorter as one fallout of this unfortunate election. Let me explain.

There is general agreement that prior to the next election, both the Republican Party and the Democratic party must make significant changes within their own parties and must also support meaningful changes to the electoral system. During this process, all the dirty laundry and the divisions in the party will be brought to light. Given the number of issues and the rifts within the membership it is most unlikely, that either party can build a tent large enough to accommodate and resolve all these issues to the satisfaction of all members.

Already, there are a number of party leaders who profess to be loyal to their party but have their own agendas. As I said, many are also shying away from flouting any party affiliation at all and building their brand in their own name. This is a trend which can lead to voting blocs loyal to an individual candidate.

Currently, there are well-known voting blocs which could become formidable political parties organized around particular issues. The Libertarians could recruit more effective leaders and become a stronger player. The Green party could mobilize the increasing number of Americans who want stronger action against climate warming. The Tea Party could find new life under the leadership of someone like Ted Cruz. The Alt.right movement could morph into a political party and give a powerful voice to the far right. The supporters of Bernie Sanders who feel they were betrayed by the hierarchy of the Democratic party and who also believe Clinton cost them the election, could break away from the mother ship and organize a political party. The millennial s could feel they have lost their voice and choose to organize. The farmers, like the farmers in western Canada, who feel they have become disenfranchised by city folk, could organize their own party. And, the list goes on.

It must also be remembered that in a world with pervasive communications, intrusive social media and new techniques such as crowd funding, it is certainly much easier to organize motivated people.

Such an outcome would be both traumatic and chaotic. The U.S. Constitution is not designed to function within a pluralistic form of government and there are very many impediments to the implementation of a multiparty system. How would the country elect a President? How could the Electoral College function? How could the process to appoint Supreme Court judges work? How would the system be able to accommodate coalitions? How would the Government ratify international treaties?

These problems are just the tip of the iceberg.

Clearly, this situation, if it should happen, would not fully develop overnight. However, if one of the major players becomes a political force and starts the ball rolling, it could unfold rather quickly and there could be a rush to get on the band wagon early in the new game.

I may be too pessimistic. But one thing is sure. If you live in the United States, you better fasten your seat belt very tightly because there is a very rough road ahead.

 

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The U.S. Federal Election System Is Rigged

The U.S. Federal Election System Is Rigged

Beyond a doubt, the U.S. federal electoral system is rigged. Sad to say, this activity for the most part is legal. Even sadder, overwhelmingly the people who perpetuate the rigging are Republicans.


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I am, of course, talking about such anti-democratic activities as gerrymandering, unreasonable voter restrictions and voter suppression.

It must be remembered that in the U.S., federal elections are the responsibility of and run by the federal government. However, for constitutional reasons, the voting processes governing who gets to vote are controlled by the State governments. As a result, every State government has enacted its own rules for voting and there are dramatic differences in these rules from State to State.
Unfortunately, ever since 1789 when the U.S. Constitution came into effect, most U.S. States have used this power to disenfranchise voters in very discriminatory and anti- democratic ways.

The following are some examples of widely used discriminatory abuses:

Gerrymandering: This is a process by which a governing party draws or redraws electoral boundaries to give its party a numerical advantage over an opposing party. This tactic has been used widely throughout the U.S. since its founding.

Discriminatory restrictions on individual voting rights: This tactic has also been used frequently across the country since the beginning. Residency requirements, unreasonable proof of citizenship, literacy tests, denial of voting rights to prisoners and ex-convicts, restrictions on absentee voters, requirements for land ownership are some of the most popular barriers used to disenfranchise individual voters.

Voter suppression: These tactics are not aimed at individuals but are used to make it difficult for targeted groups of citizens to cast their ballots. Reducing early voting days or hours, reducing the number of polling stations in certain neighbourhoods, locating polling stations in hard to reach locations, purging voter lists, telephone jamming to interfere with canvassing are some of the well-known tactics. There was even a situation in Florida where the authorities dispatched a work crew to a polling station to rip up a perfectly functioning sewer system under the building. The resulting stench was so strong that the polling station had to be closed for the rest of the day.

Eventually, the electoral abuses in the U.S. became so epidemic that the Federal government decided to take action to curb these abuses and on August 6, 1965, the Congress, under the leadership of President Lyndon Johnson, enacted the Voting Rights Law. The stated purpose of this law was to overcome the legal barriers at the state and local levels which prevent African Americans from exercising their right to vote.

The new law did not seek to make existing restrictions illegal or to repeal any such restrictions. Rather, the law was drafted to make it more difficult for certain States to enact new restrictions or to make changes in existing restrictions.

This legislation contained two major provisions. It identified 15 States that had a chequered history of racial discrimination. They became known as the “covered” States. The Act then required these States to get pre-clearance from the federal Justice Department before they changed or enacted any measures affecting voting.

As you might expect, there was considerable opposition to the law and some States even chose to ignore its provisions.

On April 22, 2010, Shelby County (a county in Alabama) launched a law suit against Eric Holder (the U.S. Attorney General) attacking the constitutionality of the law.

On June 25, 2013, the Supreme Court of the United States, in a 5 to 4 decision, ruled that the section establishing coverage for the 15 States was unconstitutional because it was based on data that was outdated. The Court did not hold that the whole Act was unconstitutional but since the coverage section was shot down, the section providing for pre-clearance was now moot.

As a result, there is no longer any meaningful oversight and States are at liberty to introduce restrictions as they wish. The only tool now available to curb their appetite is individual lawsuits brought by individuals or community groups or, once in a while, by government agencies. This is a very expensive and time consuming process to achieve a remedy.

There was major outrage following the decision and major concern that the law had been gutted. There were also many, many calls for the Federal Government to introduce new legislation. President Obama in this year’s State of the Union address urged Congress to do something but nothing has happened. A number of Bills were brought forward by various members but they have all died at the Committee stage. Obviously, the politicians have no stomach to pursue this issue in the current toxic political environment.
So, the question arises…what has happened in the aftermath of the Supreme Court decision?

I have to back up a little bit because, as I said, some States were ignoring the law and going forth with new restrictions even before the law was effectively struck down.

In the past 5 years, 21 States have enacted or tried to enact new restrictions. Of these, 21 States, 16 have a Republican government and 5 are Democratic. Some of these new laws are currently being challenged and so not all the restrictions are yet in place and, therefore, are not in play for the 2016 election.

At this moment, 15 of the 21 States will have their restrictions in place for the 2016 presidential election next week. Of these, 12 are Republican and 3 are Democratic.

So, it is quite clear that it is predominately the Republican Party which is capitalizing on this change in the legal environment and is continuing to disrupt the U.S. electoral system to its own advantage.

Thank goodness, in Canada we are virtually free of these problems and our electoral system is accepted by our citizens as being fair and honest.

To begin with, in Canada the Federal government not only runs the elections but, unlike the U.S., it also sets the rules governing voter eligibility and these eligibility rules are the same throughout the entire country. For Federal elections, the Provinces do not have any say and so there are no variances Province to Province.

Also, in Canada there is a formal legal process for determining the boundaries of the Federal electoral districts. By virtue of the Canadian Constitution, electoral districts must be reviewed every 10 years to reflect changes in population and population movements and the boundaries revised to reflect the new demographics. There are 10 Electoral Boundaries Commissions, one for each Province, which carry out this process and their decisions are final. So again, unlike the U.S., gerrymandering by the Provinces or even Federal MP’s themselves is not possible.

In recent memory, there is only one clear case of voter suppression. This took place in Guelph, Ontario during the 2011 Federal election when a worker for the Conservative party used a campaign computer to send out Robocalls to several thousand voters falsely telling them that their polling station had been changed. In 2014, the party worker was convicted of a violation of the Elections Act and was sentenced to 9 months in prison. This sent out a strong message that voter fraud would not be tolerated in Canada.

There is one final concern that needs to be addressed.

As I said earlier, there are many new restrictions which will be in play for the first time in the upcoming U.S. federal election. Given the volatile circumstances surrounding the current election campaign, many commentators, understandably, are concerned that there could be serious confrontations, even violence, at numerous polling stations which could then lead to widespread unrest. Let us hope these fears are unjustified.

However, to paraphrase the words of one Donald J. Trump, we will be kept in suspense until we know what actually happens.

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The Alt Right

The Alt Right

The Alt-Right, shorthand for The Alternative Right, has become a new amorphous player on the U.S. political scene and is tugging at the hearts and minds of American Republican voters, primarily white millennials who have a college education.


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The term was coined by Richard B. Spencer in 2010, an editor of The American Conservative, when he launched the Conservative Right blog.

The Alt-Right is not a political party and it has no formal organization or formal ideology. So far, it is not even considered a movement by most observers. It relies on the Internet, blogs, podcasts and various social media to allow its adherents, often anonymously, to express their views and to encourage discussion. Using the hash tag #AltRight, its adherents have become surprisingly effective proliferating their views and in forcing these views into the political mainstream.

While its primary focus is to promote extreme conservatism and to protect “white identity”, it is sometimes easier to describe what its followers are against rather than what they support.

Its founder claims the Alt-Right is redefining categories for a new kind of conservatism. The movement, to extent it can be said to be a movement, denounces political correctness. It is against both legal and illegal immigration and it is against free trade. Various spoke persons have expressed views associated with white supremacism, anti-Islamism, anti-feminism, anti-Semitism, and right wing populism.

During its short life span, it has succeeded in attracting the support of a large number of far right publications and a growing stable of well-known proponents for the far right. Clearly, the Alt-Right is very savvy in using technology to spread its messages and leverage its influence on a much wider audience.

Chief among Alt-Right’s most vocal and visible supporters is the Breitbart news organization which, until his death in March 2012, was run by Andrew Breitbart, a far right conservative and former editor of the Drudge report. He was succeeded by Stephen Bannon another high profile spokesperson for the far right.

There is general agreement that Donald Trump is a “hero” in the eyes of the Alt-Right supporters. There is no evidence, however, that Trump explicitly endorses the Alt-Right or its ideology, informal or otherwise. Nevertheless, there is no denying that many of Trump’s policies have much in common with the views of most Alt-Right devotees.

Also, it should be noted that when Trump juggled his campaign team for the third time, he appointed Breitbart’s Chairman, Stephen Bannon, as his new campaign chairman.

It is difficult to determine what influence, if any, the Alt-Right will have on the current election. However, in the aftermath of the election when the Republican Party tries to redefine itself to be relevant, it will be interesting to see what role the Alt.Right plays during this process.

Since the Republican party is badly split and since the Tea party has faded into the distance, there is clearly room for a third party that better captures the mood of a large number of the disenchanted Republicans.

Could the Alt-Right become that party?

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Republicans vs Democrats

Republicans vs Democrats

As I watch the U.S. election lurch towards the finish line, I have been trying to decipher the single most significant philosophical difference between the Republicans and the Democrats in the fog of the current campaigns.

Obviously, there is no simple answer. Nothing in either parties’ campaign platforms can be defined in black and white. Often, the differences cannot even be described in shades of grey. Also, within each party, there are extreme factions which muddy the waters even further.


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That being said, some things are clear. For example, the traditional labels which are used to differentiate political philosophies frequently do not apply in the current political environment. Terminology such as conservative vs. liberal, left vs. right, capitalist vs. socialist, free trade vs. protectionism, for instance, are for the most part no longer particularly meaningful in the context of the current campaigns and can often even be misleading.

Both parties, to a greater or lesser extent, have platforms which embody concepts of capitalism, socialism, protectionism, free trade, universal medical care, tax reform, and bureaucratic reform, to name a few examples. Often, it is more a matter of degree, and, as a practical matter, the differences can be hard to define and articulate let alone explain to the voting public.

So, the question remains. Is there any significant or overriding factor which defines the major difference? In my opinion there is such a factor and in this paper I will try to explain this difference, the reasons for this difference and, if my theory has merit, the eventual ramifications which could follow.

It is my view that staunch Republicans, primarily poorly educated white Americans, desperately want to turn the clock back to reflect an earlier time and, in their view, a simpler time in their country’s history. The Democrats, on the other hand, accept the reality that today’s world is a different place since the American Revolution and its aftermath and needs to be governed differently. They understand that old remedies do not necessarily fix new problems.

There are several signs which support my conclusion.

First of all, Donald Trump’s slogan to “Make America Great Again” is itself looking back and attempting to recapture something undefined in America’s past which he wants voters to believe is much better than what they have today. This slogan also implies that unless he is in charge there is little in America’s future that will be any better. Indeed, it will be horribly worse off and this is all the more reason he says we must turn the clock back as quickly as possible.

Next, the furor over the future makeup of the U.S. Supreme Court is a case in point. Again, the die-hard Republicans want to turn the clock back to an earlier time. They desperately want to fill the vacancy and future vacancies on the Court with justices who adhere to the judicial philosophy of the late Justice Scalia. He was termed an “originalist” because he felt strongly that the U.S. Constitution must be interpreted according to the meaning of the words as they were understood to mean when they were written in 1789 or at the time of the subsequent 27 amendments. In other words, the meaning of these words should not take into account the changes in the social and economic fabric of the country since the time they were written. The moderate members of the Court accept that the world is different and they are willing to modify, albeit slowly, previous jurisprudence to accommodate this vastly different world.

Lastly, the role of the Tea Party certainly has to be considered in any analysis. The Tea Party, of course, is not a political party and is only a disparate and loosely connected group mostly comprised of active conservatives. While currently not a major player in the national political arena or in the election, their adherents do have an impact on the thinking and behaviour of many Republicans including the Republican members of Congress. And they usually vote as Republicans.

Much of their thinking also advocates a return to the past. Among other things, they advocate a national economy operating with minimal oversight much as it did in the aftermath of the American Revolution. They also strongly support Justice Scalla’s philosophy of originalist constitutional interpretation.

So, all in all, I think there is considerable evidence to support my conclusion that a major thrust of the current Republican campaign is indeed to convince the voters to turn the clock back to some earlier time.

This represents a major divide between the Republicans and the Democrats.

If my conclusion has merit, it raises three important questions.

  1. Why do so many staunch Republicans, particularly white Americans, want to turn the clock back?
  2. Depending on the results of the election, what will happen next?
  3. What will be the future of the Republican Party?

I think the answer to the first question is fairly obvious.

In the decades following the American Revolution, the white population dominated society in the U.S. People of other races or other colour were required to do the bidding of the white class. Further, the economy was primarily agricultural and rewarded individualism. The urban populations were a much smaller part of the landscape. The law of the gun had meaning and often replaced the law of the land. Economic regulations were few and far between. Foreign competitors posed no significant threats.

Today, lowly educated white people are very much aware that this way of life is gone or has changed dramatically and they feel threatened. They believe all the significant changes in the social and economic fabric of their country have worked to their disadvantage. Also, they realize the shifts in demographics are working against them and fast. They are fearful and, understandably, are responding positively to Trump’s campaign rhetoric.

The Democrats are being forced to deal with a much more complicated menu of issues.

They accept that the world is much different these days. They realize that several world depressions and recessions, two world wars and numerous regional wars, together with the threat of nuclear warfare have made our world much more complicated and interconnected. They also understand that the mind boggling advances in such fields as data processing, communications and medical science together with the phenomena of social media have dramatically changed the needs and social behaviour of society.

However, these are difficult subjects to address politically because in the political world voters usually opt for simplistic solutions if offered to them.

Therefore, it is easy to understand why voters, particularly lowly educated voters or fearful voters, buy into Trump’s snake oil proposals which, unfortunately, have a very simplistic appeal.

Next, what will happen in the aftermath of the upcoming election?

I am concerned that whoever wins the Presidency, there will be a major upheaval in the political stability of the United States.

If Trump wins, it will quickly become apparent that he cannot deliver on virtually all the outlandish promises he has made and a major segment of the population will quickly become disenchanted and this could lead to major discontent. To the extent he can deliver, he will certainly create much economic and international chaos. As well, because of the different factions within the party it is more than likely there will be major paralysis in the Congress as the different factions fight among themselves and try to restore their credibility and their power. The situation will be even more chaotic if the Democrats should regain the Senate. Moreover, if, by some stretch of the imagination the Democrats should win both the Senate and the House of Representatives the situation, to use Trump’s favourite expression, would be a total disaster.

Even if Trump loses and especially if at the same time the Democrats regain the Senate, the political stability will also be badly shaken. However, in this eventually, the major warfare will take place within the Republican Party. Almost immediately, the different factions which have been somewhat muted during the current campaign, will take up arms against each other. They will quickly disavow Trump’s brand of Republicism and try to distant themselves from the ruling cadre. The likely post mortem will be brutal and will reveal schisms that probably can’t be repaired. They will become virtually ineffective as an opposition party and if they continue with their obstructionist tactics they will incur the wrath of many, many voters.

It will not be a pretty picture and this leads me to my final question, namely, what will be the future of the Republican Party?
It is my view that ever since Mr. Trump’s entry onto the political stage, the life expectancy of the Republican Party has suddenly become much shorter.

Any party which chooses to continually deny the impact of history or the reality of changing demographics or which continues to be obstructionist for any length of time cannot survive in today’s environment.

For certain, there will be heroic efforts to save the Grand Old Party. There is, however, a high probability that these efforts will not succeed. The political environment has, largely due to the behaviour of the Republicans themselves, become so toxic that it will be most difficult to arrange even a cease fire let alone total peace within the party. Party devotees have become bitter enemies of each other. Many old school Republicans feel that Trump has already hijacked the party and will certainly fight to totally reject his brand of Republican politics. It is quite likely that the Tea Party will find its voice again. The rivalry between the different factions in the party will probably become even more public and so each faction will publically be fighting to protect its own turf. There will be ugly battles over party leadership. Sitting members will struggle to speak with a common voice and to be respected in Committees and on the floor of the Senate and House. Major donors could shy away as they see a party in total disarray. In desperation, the party could become even more obstructionist and the animosity between the Republicans and the Democrats could become irreparable. And, the list goes on.

Eventually, the voting public would react and show its displeasure.

Given these circumstances, it would be most unlikely that the party could hold itself together. The likely outcome is that some bloc or maybe even more than one bloc will break away and form a third party which will, of course, dramatically change the political landscape in the United States. If that happens, the United States could end up with a system of government more akin to the European models. But that is the subject for another day.

For sure, whatever the outcome of the election, there is going to be a rough road ahead.

 

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Globalization At Risk?

Globalization At Risk?

As could have been anticipated, there has been a frenzy of media coverage following the vote by the electorate in the United Kingdom to leave the European Union. The pundits have been falling over each other tying to analyze the causes and to predict the consequences of this decision.

Much of the analysis makes sense but there is also a lot of analysis at the periphery which does not make sense or is based on misinformation and only serves to confuse the issues and frighten people. Only the future will tell us how much of this will prove to be true.


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This being said, in my opinion, there is a theory finding favour among some observers which does make considerable sense and certainly deserves further study and probably immediate action.

This theory holds that the economic tsunami of globalization is now facing serious headwinds and this is leading to a new political world order and a new economic world order that will shape our world for many, many years to come.

This paper will address some of the thinking behind this theory.

Let me begin by summarizing what is currently happening in the United Kingdom.

It is well known that a significant percentage of Britons have been against the EU (and its predecessors) since the beginning. They resent the growing interference from the EU into their affairs. They perceive the EU to be too impersonal and too far removed from the scene to understand their problems and desires. They object to the exploding number of restrictions imposed by the EU which are constraining their traditional way of life. They perceive that the EU has failed to bring any economic prosperity to the country but, instead, has brought widespread economic hardship. They have lost hope that the politicians can change the country’s arrangements with the EU in any meaningful way.

For a variety of reasons, Britons have also lost faith and trust in the elites and are no longer prepared to do their bidding.
As well, a large number of citizens have not personally benefitted from the single European market or globalization in general. Indeed, many people have been disadvantaged and they do not see any change down the road. They are particularly frustrated by the austerity mantra that has spread across Europe and wonder why it is being foisted on them.

They have also become increasingly upset about the large number of foreigners and refugees who are flooding into the country bringing with them different values, different religious customs and different cultures. They also accuse these immigrants of taking away their jobs. This has led to a surge in xenophobia and many Britons now perceive a huge erosion in their old way of life. Even more frightening, this is happening at rate which is much too rapid for them to deal with.

The breakdown of the Leave vote is, of and in itself, most illuminating. The voters sent a clear message that older people, rural dwellers, those less educated and lower wage earners are the most disenchanted and wanted to be heard.

In hindsight, it has become crystal clear that there are numerous issues preying on the voters’ minds, not just immigration issues. While immigration was clearly the lightening rod issue which triggered the widespread vote against the Remain side, it is also obvious that there are many other issues which played on the voters’ minds and which they feel strongly must be addressed.

Is it any wonder that the electorate, finally given a voice, chose the Leave option?

And now, since the Leave movement was so successful, everybody has suddenly become seriously worried about the contagion effect and, in my opinion, they should be.

Even prior to Brexit, the EU was under attack by many critics. Almost every country in the EU has one or more political parties who advocate withdrawing from the EU. While some already have more clout than others, most are growing in popularity and becoming a force to be reckoned with. For instance, Marine Le Pen who is head of the National Front party in France is also internationally known and influential beyond her own country and could very much help the cause in other countries. Already, a growing chorus of politicians in several EU countries are calling for similar referendums.

So the seeds are already sown and capitalizing on the success of Brexit and the reasons underlying its success, it is anticipated that many politicians in many more countries will be mounting vigorous campaigns for a similar referendum in their own country. It is also expected that some of the campaigns will be successful. If so, this will increase the odds for similar success in more and more countries and many people fear there will be a domino effect spreading across most of the EU.

The end result could be the breakup of the EU in its current form. This may seem like a long shot but so was Brexit. Also, frightening as it sounds, the odds that Donald Trump could become President of the United States are increasing and this is another long shot that could come to pass and which was not expected. If that should happen, it would be in large part due to many of the same problems that plague Europe.

The theory which I referred to holds that if the EU should fall apart and Europe should splinter into a collection of individual countries and if the UK and the US should move towards various forms of protectionism, economic globalization could become one of the first casualties.

Each country in the former EU would be very much on its own and there would be a major restructuring of the world’s economic affairs. There could be an unworkable web of trade restrictions and outright trade barriers. It would be extremely difficult to create, let alone maintain, trade blocs of any significance. Markets would shrink in size and in importance. Economies of scale would not justify huge investments because there would be no global marketplace for many industries’ products and services sufficient to earn a reasonable return on investment. There could be a resurgence of cottage industries within individual countries. Intellectual property protection would be fragmented and inconsistent throughout the world and this would be a major barrier to doing business in many jurisdictions. At a country level, politicians and decision makers would scramble to help local businesses weather the storm and, rather than help the situation, they could cause further damage.

Whichever way you cut it, all the rationale and benefits which support globalization would be at risk and, in their own self-interest, companies would take whatever steps they can to survive.

All of this is shades of the ‘30’s and there is general agreement the fall out would be brutal. Therefore, no one in their right mind is advocating that the world should unfold this way.

Nevertheless, there is also general agreement that the British electorate voted on emotion not facts. There is no denying that this a very emotional issue for a lot, and probably a growing number of people, in many places across the world. And, as we all know, experienced politicians are very adept at tapping into human emotions. And, to make matters even worse, as we saw in the UK referendum, most Britons did not make any effort to understand the issues or to challenge the propaganda. Finally, and this most worrisome, the general public is less inclined to accept any leadership from the elites or to listen to any facts.

Conventional wisdom tells you this scenario should not even be in the cards. However, it is and, if it comes to pass, the whole world is in for a very rough ride. Also, public figures will need a lot of wisdom to right the ship. If it does not unfold this way, public figures will still need a lot of wisdom to resolve the collateral and residual issues that have suddenly become more urgent because of Brexit. There is a widespread recognition that the United States is experiencing a myriad of problems which are jeopardizing the American dream. These problems are well known and well documented.

Increasing racial violence, a widespread illegal drug culture, insidious gang warfare, military like law enforcement, inhuman incarceration, inequitable gerrymandering of electoral boundaries, voter suppression, permanent electioneering, political gridlock, the overwhelming political clout of Political Action Committees (PAC’s), income inequality, crony capitalism, eroding social consciousness, erosion of workers’ rights, eroding international respect are some of the most talked about.
I contend that these examples are only the symptoms. They only categorize the problems in behavioural terms and this descriptive terminology does not identify or address any underlying causes which I prefer to label root causes. It’s like a doctor who tries to address an illness with pain killers without trying to understand the cause of the pain. Unless steps are taken to deal with root causes, it is going to be practically impossible to treat the symptoms.

I have identified five root causes which I believe collectively or individually underlie many of the symptoms which I listed earlier. These are a mix of cultural behaviour and structural shortcomings.

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Election Circus in the United States

Election Circus in the United States

In my opinion, serious political scholars and commentators are finally beginning to zero in on the root causes of the election circus in the United States. And, it is not “the economy stupid”.

No, it’s all about the culture.


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Such strange bedfellows as the Economist and the Toronto Star agree it is not the economy although economic woes are still being touted by many politicians as the primary cause of all the problems. The economy is doing quite well thank you and despite some weaknesses together with concerns about the world economy there appears to be a wide consensus that the economy will continue to do well in the near term. David Olive in the Toronto Star cites a number of statistics to support his theory that America’s best days are still ahead and that the United States will continue to dominate the world economy.

For the most part, economic issues have become a side show in the current debate because it is the myriad of cultural issues which now occupy centre stage.

And, it is becoming quite clear that a significant number of Americans cannot handle the huge disruptive changes in the United States’ culture and that this is the real problem creating the chaos in the current electoral environment.

It is true, of course, that there are important economic concerns which still need to be addressed.

As Olive reminds us, for instance, there are a sizable number of Americans who fear they are losing their country to outsiders particularly to people from low wage countries who have stolen American jobs. This is a legitimate concern for those affected and needs to be dealt with . . . although the solution appears elusive.

But, deeper down, many Americans, particularly white people who continue to retain more historic values, believe that many of their traditionally held values and individual freedoms are being taken away from them by younger people and newcomers with different cultural customs and values.

The white population in the United States is fast becoming a minority and white men in particular are afraid. It is predicted that, by mid-century, people of colour will constitute the majority of the American population and this will make the problem even worse.
Faced with this sudden and dramatic shift in demographics, those people who adhere to many of the outdated historical values, such as supporters of the Tea Party, are most upset. They feel strongly that many of their former cultural freedoms and privileges are being taken away from them or are being badly trodden upon.

For instance, they can no longer openly engage in racial behaviour, ostracize or discriminate against gays, enforce trade restrictions, enjoy total freedom to bear arms, impose restrictions on religious freedom, to name a few.

Faced with this reality, a vocal and often powerful minority is fighting a rear guard battle.

To this point in time, it is mainly being fought at the State level. Many state legislatures have recently enacted many rash laws. The southern states in particular are leading the charge. For example, recent laws enacted at the state level allow people to carry concealed weapons without a permit and also allow students to take guns into class. Very recent laws allow merchants and others to refuse service based on religious beliefs. Other states have passed laws severely restricting voting rights using discriminatory criteria. Several states have passed laws imposing restrictions on the procedures used in abortions. Two states have even passed laws regulating who can use public bathrooms.

As I said, so far the actual changes have been made at the state level. However, now that the federal election process is in full flight, the cultural rhetoric is alive and well and taking the oxygen out of the room in both federal campaigns.

Messrs. Trump, Cruz and Sanders are all passionately advocating many positions which are squarely aimed at restoring threatened cultural values in order to appeal to the disenchanted and fearful voters. Tough immigration restrictions, banning Muslims, revoking Obama care, permitting torture, providing free education, relaxed gun laws, eliminating whole government functions such as the taxation department, restoring military dominance, and introducing trade barriers are all promises being made by these candidates.

These are also the red meat issues at every candidate rally.

Further, prior to the campaigns, most of these issues had some hawkish advocates but there was not wide spread or organized unrest. Apart from a handful of protesters such as the Occupy Wall Street movement, the concerns about these issues was somewhat muted. It was the candidates who decided to take the lead and to make these issues center pieces of their platforms and, therefore dramatically heightened the atmosphere of anxiety. When they started to publicly push these issues they were not leading from behind. Admittedly, they struck a chord but they have also succeeded in putting the issues on the public agenda in a way which prevents reasoned debate and discussion. These issues are now more rallying cries designed in many cases to inflame and instill fear in the voting public.

This leads me to my last point.

There is no way that the candidates can deliver on these promises. When, in the aftermath of the election, the public realizes these were empty promises from politicians who knew they couldn’t deliver, the public could very well over react. At the very least, the integrity of the whole electoral system will be severely damaged with unforeseen consequences.

So, I think it has become increasingly clear that the cultural issues are dominating this election. In this sense, it is a very critical election in American history because it truly is a fight for the hearts and souls of the American voters.

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Is The World Becoming Flat?

Is The World Becoming Flat?

Since the 2008 recession, world economic growth has been slowing down everywhere and there is a consensus among economists, investors, bankers and others that this economic stagnation will continue worldwide for a long time to come.

As one pundit said: “The world is stuck in the slow lane and nobody seems to know what to do about it”.


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The economic statistics seem to bear this out. Prior to 2008, many developed countries were enjoying annualized growth rates in the 3 to 4 percent range. China and some of the emerging markets were enjoying growth rates in the double digits.

Since 2007 however, world growth rates have fallen significantly and continue to fall with almost every updated forecast. Canada’s annualized growth rate for 2016 was recently reduced by the OECD from 2% to 1.4 %. The U.S. rate has been revised from 2.4% in November, 2015 to 2.0 % in February, 2016. During this same time frame, the world rate has also been revised downward from 2.8% to 2.5% and this rate, of course, includes developing countries which have still enjoy much higher rates than the world average. European counties are almost all at about 1.5%. Japan is 1% and Russia is -1.0%. China’s growth rate, which averaged 9.88% from 1989 until 2015, is currently forecast at 6.3% for 2016, the lowest growth in 25 years.

In its February 2016 economic update, the OECD stated that all sectors of the economy have forecast downgrades in their growth forecasts since November, 2015 and, further, there continues to be a significant slowdown in global trade growth. This being so, it seems more than likely that the trends will continue. Interestingly, the Trudeau government in its recent budget has used a growth rate of 0.4% which some observers point out is probably too low but politically very shrewd.

There is other data which paint a very negative outlook for the world economy. Governments’ debt-to-GDP ratios have risen significantly around the world since 2008. Yet long term interest rates remain extremely low. Ten year government bond rates in the U.S. are around 2%. They are around 0.5% in Germany and 0.2% in Japan. Many market commentators believe that real interest rates could be around zero or even go negative for another decade and that inflation could stay close to 1% during this time frame.
Clearly, considering all these negative economic outlooks, there is ample evidence to support the experts who claim that, not only are we currently experiencing economic stagnation, but that it will continue for some time to come and probably even get worse.
Economists contend that countries need to have annual growth rates on a continuing basis approaching 3% in order to sustain economic prosperity and, if they are right, and the doomsayers are also right, we could be in for a rough ride.

The question arises, of course, why is this happening and what can we do about it?

As you might expect, there are a number of theories going the rounds and several of these are being promoted by very prominent scholars.

Kenneth Rogoff blames the problem on debt buildup. Ben Bernanke blames the problem on a savings glut. Paul Krugman says it is a liquidity problem.

In this paper I have chosen to address three other theories that seem to be generating much discussion in economic circles.
The first is called “Secular Stagnation”. The second has been dubbed “Supply Side Headwinds”. Finally, a theory called “The Demographics of Stagnation”.

 

Secular Stagnation

The well-known proponent of this theory is Lawrence Summers, a former U.S. Secretary of the Treasury and a Professor of Economics at Harvard University.

In a nutshell, this theory holds that the economies of the developed world are suffering because of an increasing propensity to save and a decreasing propensity to invest (spend).

Excessive saving acts as a drag on demand thereby reducing growth and inflation. The imbalance also pulls down real interest rates.
So, when the desired levels of saving exceed desired levels of investment, we experience shortfalls in demand and stunted growth.
In the last six years or so, real interest rates have been near zero and have even turned negative in Europe and Japan. During this same time frame, inflation has also stayed very low. Summers is particularly concerned that real interest rates have remained so low for so long and that they are expected to stay that way. He also reminds us that demand has been weakening for some time.
Summers argues that during this time there has also been an increasing propensity towards saving and a decreasing propensity towards investing or spending.

He points out that the central banks in the G7 have collectively improved their balance sheets by $5 trillion. Large corporations such as Apple and Google are awash in cash but are reluctant to distribute more of it to their shareholders. The top 1% is accumulating untold wealth but is hording it or simply swapping paper among their peers to buy existing assets. At the individual level, people are saving more for retirement or to hedge against costs that used to be covered by employers because these benefits are being taken away by employers. CIBC claims in a recent report that individual Canadian investors are currently sitting on $75 billion in extra cash. This is money which has been accumulating since the 2008 recession and that would normally be invested.

He concludes that we have reached the tipping point and that there is an undesirable imbalance between saving and investments. There is too much saving (or hording) and this is a major cause of reduced demand and low growth.

To solve the problem he recommends that governments working in concert with each other use fiscal policy to reverse the trend. He believes that monetary policies have run into diminishing returns. He contends that the core problem of secular stagnation is that “the neutral’ real interest rate is too low and that this rate cannot be expanded through monetary policy”. He also makes it clear that international intergovernmental co-operation and co-ordination is absolutely crucial for the use of fiscal policy to succeed.
He also points out that fiscal policy is the best way to incent public spending on infrastructure, such as roads, bridges, sewers, transit, etc., all of which is badly needed.

He believes the key priority at the G-20 summit in China this September should be to increase global demand. After all, he says, “Raising demand is actually not that difficult, and it is much easier than raising the capacity to produce”.

Interestingly, while Summers and Krugman differ as to the causes of the problem, they both agree that fiscal policy is the best tool to correct the problem. However, in an interview with Fareed Zaharia on Fareed’s GPS program on March 6, Krugman stated he supported using fiscal policy but would avoid using tax policy. He fears that any funds generated by tax policy would likely be saved or used to pay down debt and not be used for additional spending.

Bottom line . . . Summers believes strong government intervention using fiscal policy is necessary to solve the problem.

 

Supply Headwinds

This theory is proposed by Robert J. Gordon in his new book, the Rise and Fall of American Growth. Mr. Gordon is a professor of Economics at Northwestern University.

In a nutshell, Mr. Gordon argues that from 1870 to 1970, Americans benefited from a number of developments which dramatically transformed living and working conditions in the U.S. and which created huge consumer demand and demand for investment but, that since then, technological advances don’t really compare to the ones that transformed the U.S. economy in the earlier century. Therefore, more recent developments have not spurred the same consumer demand or the same demand for investment. In other words, the supply side of the economy is now a major part of the problem.

From 1870 to 1970, there was a bonanza of breathtaking and transformative innovations. He identifies five Great Inventions which occurred during this century: electricity, urban sanitation, chemicals and pharmaceuticals, the internal combustion engine and modern communication.

These innovations led to new and often labour saving conveniences which allowed more and more people to abandon hard physical labour for good. Because of these transformative innovations, we now enjoy conveniences such as electric lights, running water, flush toilets, central heating, automobiles, airplanes, telephones, radios, vaccines, antibiotics, all conveniences which we currently take for granted.

However, Gordon argues that since then most technological advances have only resulted in marginal improvements in our well being. Most often they only build on or exploit or refine existing knowledge. We have fancier and safer automobiles, better heating and air conditioning systems, clearer and larger television sets, smarter phones, faster and more comfortable trains, more effective antibiotics, improved surgical procedures and on and on.

Nevertheless,, while useful and while they usually lead to improved productivity and additional comfort and convenience, these technological advances are not transformative. This being the case, he argues they do not generate the kind of explosive demand necessary to support strong economic growth.

He concludes that he cannot foresee the new transformative technologies needed to drive the necessary growth and predicts economic growth will remain around 1% for some time.

His critics, and apparently there are many, are less pessimistic than he is and are optimistic there will be major advancements around emerging technologies such as artificial intelligence or genetic engineering. They also point out that he fails to mention his own mixed record as a forecaster. In a 2003 essay titled “Exploding Productivity Growth” he optimistically stated that productivity in the United States would grow at an average of 2.5% per year for decades. Yet, as we know the nest year, 2004, was the tail end of the high growth rates that had started in the 1990s and which have been going downhill since then.

Bottom line………Gordon is hoping some inventive entrepreneurs will come up with the transformative technologies that will solve the demand problem. Moreover, he does not put forth any policy suggestions which might be used to accomplish this.

 

The Demographics of Stagnation

This theory has been put forth by Ruchir Sharma who is the author of a forthcoming book titled “The Rise and Fall of Nations”.

In a nutshell, this theory holds that the declining population growth rate together with the changing population demographics i.e. the slower growth in people of working age and the greater growth of more elderly people, will result in lower economic growth.

The author says the experts have largely overlooked these changing demographics, particularly the collapse of the working age population, and claims this may be one of the most important factors in the negative prognosis for world economic growth.

Unfortunately the book is not yet available but from articles I have read, he seems to be arguing that due to low fertility rates and healthier older people, there will be relatively fewer people of working age available to produce the goods and services to fill consumer demand. Coincidently, there will be fewer working people with the purchasing power to support robust consumer demand. And, while there will be a larger number of older people, they will only need minimal goods and services at minimal prices. These older people, whose number is statistically increasing every day, spend less, save more, pay fewer taxes, etc. In other words, even with their growing numbers, they will not create enough robust consumer demand of the kind necessary to drive meaningful and sustained economic growth.

It is true that unemployment rates for the working class remain high at the present time which suggests they are in over supply. This is particularly true for the younger people in the workforce. However, it can be argued that a major factor contributing to this problem is the mismatch between job opportunities and the skills necessary to fill them. There are jobs in many sectors of the economy but there are not enough workers with the necessary skills to fill these jobs. As the demographics of the population continue to shift there should be continuing pressure on more education and probably different kinds of education for young people which should alleviate this problem to a large degree.

It is widely understood that the replacement fertility rate (the rate below which the population starts to shrink) is 2.1%. Currently, world population growth is predicted to be around 1 to 1.5% and is trending downward which means on a world basis we are already below the replacement rate.

Further, as Indicated earlier, declining population growth generally is having a significant impact on the working class population. Between 1960 and 2005, the global work force grew at an average rate of 1.8%. And since then has dropped to 1.1%, and is likely to drop further given the declining fertility rates throughout the world. In the United States it is 0.5% compared to 1.7% from 1960 to 2005. It is already below that in some countries such as China and Germany.

Some economists claim that a one point decline in population growth will eventually reduce economic growth by a percentage point. The percentage drop can very well be higher when an increasing proportion of the population, such as older people, is not making any significant contributions to society either by producing something or as consumers.

Governments around the world are very much aware of the problem and many are already taking steps in an attempt to deal with it. Many countries have implemented guest worker programs. Several countries, especially in Europe, have increased the retirement age from 65 to 67 to keep more people in the workforce. Many countries, at least until the recent wave of terrorism, had adopted more aggressive immigration policies to attract workers although eventually this is a zero sum game because the number of available workers remain the same. They are just located in different places.

Quite apart from the concern about the looming drop in the working class, many countries have also become very concerned about the alarming drop in fertility rates generally. China has changed its one-child policy. India has abandoned its forced sterilization campaign. A number of developed countries have programs to subsidize motherhood. In some countries such as Chile and France, the subsidies increase for additional children.

Notwithstanding all these efforts, it is generally felt measures such as these will not be enough to turn the tide and population growth will continue as a major challenge. Many believe the problem will likely get worse.

The author reminds us there are many factors which will continue to drive down population growth. These include wide spread birth control education, the growing acceptance of birth control methods, the increase in educational levels among women, the increase in working women, economic hardship, economic prosperity, to name a few. Therefore, it is fair to conclude that the rate of population growth and the proportion of working age people will continue to decline and based on this theory, there will also be a negative impact on world economic growth. Indeed, there could be “negative” growth on both fronts.

Bottom line . . . the solution lies in a change in human behaviour with an occasional nudge from government policy and, as we know, neither is very predictable.

Dear reader, which of the three theories do you believe?

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Wage Inequality

Wage Inequality

Recently, I served as a moderator for a discussion group dealing with the topic of wage inequality, sometimes referred to as wage inequity or wage disparity. While doing my research preparing for this task, I learned two things which I find very worrisome and I decided to write down my thoughts.

First, it will be extremely difficult, some say impossible, to restore let alone expand the earnings, ranks and stature of the middle class in the current economic environment.

Second, there is a growing consensus that it will also be most difficult, if not impossible, to reverse the trend to widespread inequality in the broadest sense unless there is some catastrophic or seismic event which will change the prevailing mindset across society.


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Prior to discussing these two subjects, it should be noted that there are several spheres of equality, e.g. moral, political, social, legal and economic to name a few and clearly all of these are at times interconnected and interdependent. However, this analysis will focus on the economic dimensions of wage equality.

Also, the statistics relied upon are based on U.S. data because similar Canadian data could not be found. However, given the similarities between the two economies I think we can safely extrapolate the U.S. data and the conclusions to the Canadian environment.

As Fareed Zakaria would say, Let’s Get Started!

 


 

The Middle Class Crisis

The following graphic depicts the stratospheric and, as many say, the immoral rise in CEO compensation in the U.S. from 1992 to the end of 2012.

 

 

Measured over a longer period, the increase is even more startling. In 1965, the average CEO pay at the largest 350 U.S. companies was 20 times higher than the pay of the average worker. This differential was in line with the views of the well-known management guru, Peter Drucker. By 1989 it was 58 times higher. By 2012 it had become 273 times higher which by any measure is an astounding gap.

The next graphic charts the medium real income by educational level from 1991 to 2013.

This data confirms that the income of the vast majority of the population has in fact been largely stagnant over this timeframe regardless of education. It is clear that meaningful increases in income have only been enjoyed by a fortunate few, such people as financiers, entrepreneurs, top level managers, entertainers and professional athletes. The data also confirms that it is not only the unskilled workers whose incomes have been suppressed but that the middle class has suffered the same fate. To make matters worse, the purchasing value of each dollar is much less over this time frame.

Next, it is necessary to look at the composition of the workforce. The following graphic confirms the massive shifts in the distribution of workers from as far back as 1860 through to 2010. The trends underlying the data on this graphic hold some ominous messages for the security and, hence, the wages and the economic well-being of the middle class in every sector.

For starters, there is one surprising message in this graphic. Contrary to popular belief, the newly tracked high tech sector has not produced that many new jobs which for the most part would be higher paying jobs. High tech employment, in this context, involves the workers who design, market and implement high tech applications not the technicians who operate or use the technology. Worse, employment in this area as a percentage of all jobs is not increasing to any extent and so, unlike the transition from agricultural to manufacturing, we are not seeing any explosion in new jobs in this new sector.

The negative trend line for the agricultural sector is not surprising and will likely continue albeit at a more modest rate. To a large extent, the agricultural community has already discovered the benefits of the economies of scale and the benefits of technology. Farms are still predicted to grow even larger and to become even more efficient and productive. The old “farm hand” that we knew is a disappearing breed.

The manufacturing sector is not expected to fare much better and will be under ongoing and probably increasing negative pressures.

The Canadian manufacturing sector, as a whole, is already weak in several areas e.g. low productivity, poor innovation, lack of scale, lack of connections to global linkages, to name a few. Further, employment in this sector has been dropping steadily.

Unfortunately, from a strictly Canadian point of view, the assault on the manufacturing sector is predicted to get worse. Two factors will continue to drive employment down in this sector. First, the continued rush to globalization, nurtured by multinational trading blocs, will drive more and more manufacturers (Canadian and multinationals) to locate or relocate in those countries with lower wages and more attractive employment laws and tax regimes. In order to survive, Canadian manufacturers who remain at home will of necessity have to become even more automated and more productive and this will mean even less manpower will be needed to produce greater output.

As well, it should be noted that the significant decline in private sector union membership and the increase in right to work legislation in several jurisdictions will also have a negative impact on job security and wage levels in the manufacturing sector.

All told, this means there will be fewer employment opportunities and less job security in this sector and this will have a negative effect on wages resulting in further wage inequality.

This leaves the services sector which currently comprises 80% of the workforce and is growing. If this sector is going to solve our economic inequality problems it is going to have to punch well above its weight and the prognosis for this happening is not good. There are a number of factors which lead to this glum outlook.

A substantial number of unskilled Canadian workers are in the services sector and there will continue to be a demand, even a growing demand, for these workers. Given governments’ reluctance to enforce already weak employment standards laws and their unwillingness to lift minimum wages to a decent level, the prospects for these workers to earn better wages are pretty dim.

There are a growing number of lowly skilled workers in the services sector. People who are employed as hospital workers, retail workers, clerical workers, hospitality workers, gardeners, for instance, are usually paid lower wages and have few benefits and are often subject to exploitation. Further, they usually do not have any voice. Given all the circumstances, it is very unlikely there will be any meaningful increase in their wage levels.

Skilled workers in the services sector are probably somewhat better off because there is an increasing demand for many of their services and in some areas there are shortages of trained workers. As well, policemen, firefighters, tradesmen, government workers, etc. are often unionized or belong to guilds and this gives them more bargaining power. Nevertheless, their wage levels have to bear some relativity to wages in general which means these workers will not be given a blank cheque. Indeed, there is already a growing backlash against the wage increases some of these workers are enjoying and this will, in many cases, serve to keep these wages down.

Highly skilled workers such as engineers, managers, doctors and lawyers continue to have an important role in the services sector. But, surprisingly, the earnings of many of these workers are being threatened. Many parts of their jobs are being taken over by technology and, hence, some of their skills or a subset of their skills are not required or are less marketable. Not only does technology eliminate the need for some of their skills but it means that many highly skilled practitioners must themselves invest in costly technology and continuing education which increases their overheads and impacts their take home pay.

There is another point to be made. Experts are predicting that the advancements in artificial intelligence will accelerate the use of robotics n the workplace. If they are correct, this will significantly impact job content and, hence, job creation.

Finally, there is a major and dramatic change in the nature of employment which is having a huge negative impact on wages, benefits and job security. This growing trend to different working arrangements may be the most significant threat of all to job security and wage equality.

I am referring to the proliferation, indeed explosion, of outsourcing and contract, part time and temporary work throughout the services sector.

Blaming a need to control and reduce overheads to be competitive and, hence, a need to avoid long term commitments, employers have been turning to this type of work at an alarming rate. Even governments are now doing the same thing although they often disguise the practice as “probationary” employment. Most of the career advertisements for lawyers in the Ontario Law Reports are for contract jobs. Most jobs in the retail sector are part time with unpredictable working hours. And the list goes on and on and impacts both the unskilled and the highly skilled.

These jobs have no job security and provide few, if any, benefits. Worse, this type of employment has a very negative impact on wages because the wage levels tend to be lower but also because the hours worked during a given week are usually much fewer and less predictable. Among other things, this uncertainty also has a major impact on the quality of life.

Clearly, these work arrangements have major advantages for employers and major disadvantages for employees so there is little motivation for employers to slow down on the rush to these work arrangements.

Although there is more discussion as to the problems this kind of employment are causing, there is no sign of any improvement. To the contrary, the problems are being allowed to get worse.

So, as a result of my research, I am much more pessimistic than I was before I started.

As I’m sure you have noticed, there are increasing calls for a system of guaranteed wages and it is easy to see why. It should be noted that critics are already expressing concerns about such a system (see the Editorial on p.IN16 of the Toronto Star published on February 13, 2016).

Nevertheless, it is most concerning that politicians of all stripes and in all jurisdictions keep promising that, if elected, they can create new jobs, more wealth and a kinder gentler world but they seldom say how. Sometimes they continue to peddle old ideas which will not work in today’s world. Increasingly, all they say is “trust me, I can do it”.

Sad to say, this type of rhetoric is not helping the cause. By fudging the facts, and huffing and puffing that they can resurrect the middle class and create a multitude of high paying jobs by waving their magic wands, the politicians and other are interfering with any realistic hope for meaningful solutions which are based upon facts and economic realities. The governed deserve better.

 

How Did We Get Here?

Having looked at the problems which now exist, it is worth considering how we got to this state of affairs.

There are, of course, many theories as to how this happened. However, while doing my research, I came across one theory which at first glance did not seem to make much sense but which, on further examination, I feel has a lot of credence.

This theory holds that in times of fear and uneasiness there is less economic inequality whereas in times of reduced stress and greater prosperity there is an increase in economic inequality.

From the early 1900’s to the later 1950’s there were a number of factors and events, particularly in North America and Europe , which created widespread fear, stress and uneasiness to societies at large. During this time frame, there were two world wars, crippling economic depressions, threats of communism, a risk of nuclear proliferation, a cold war, labour strife, food shortages, to name a few. However, it was under these conditions that governments and societies came together to implement a great many measures for the collective good. They came together to adopt the Marshall plan, to form the United Nations, to implement the New Deal, to allow trade unions to survive, to pass minimum wage laws, to create government health care systems, government pensions, and fair employment laws. Social democracy flourished particularly in Europe. And the list goes on and on.

In other words, a number of events were occurring to create more equality and a more level playing field across all segments of society. One writer describes this era as time of “de-individualism”. Another said “ if you are standing beside your buddy in the trenches in France or if you are an unemployed banker standing beside an unemployed clerk on a bread line on Wall Street you quickly develop more compassion and respect for your fellow man”.

Starting in the fifties, many of the disruptions causing the fear and uneasiness had faded or were fading away.

Currently, while there are irritating and dangerous localized conflicts, there are no world wars. There is no major global economic depression. The cold war is history. Communism is out of favour. The major nations have signed a nuclear treaty. The United Nations is still functioning, sort of. Standards of living are improving everywhere. Comparatively speaking, all is quite well.

However, according to the author who coined the word “de-individualism”, the Americas and Europe suddenly shifted to a society centered on individualism and had moved away from a collective approach to dealing with society’s problems. We became immersed in the “ME” generation. People at all levels of society developed an attitude of entitlement. In the United States, for instance, there are an increasing number of conservatives led by the zealous supporters of such organizations as the Tea Party who want to dismantle the modern model of government with all its checks and balances and return to a pioneer society where it becomes the survival of the fittest and the individual rules. In Canada, it can be argued we were certainly headed down the same road under the Harper government.

Scholars point out that the issues which are receiving the most attention today are social issues such as gay marriage, abortion, black lives matter, voter discrimination, to name a few. These are important issues which need to be dealt with but they are mostly dealing with individual concerns and individual rights.

Economic issues such as job security and wage disparity which affect all of society are, for the most part, flying under the radar.

Admittedly, there have been sporadic protests such as Occupy Wall Street but these have had no staying power. Probably, the loudest and, so far, the longest lasting protests are coming from Bernie Sanders in his campaign for President of the United States. However, it is doubtful that he can incite the revolution he is urging everybody to support.

Sad to say, that at the same time, many of the economic achievements which were introduced prior to the fifties are being neutered or dismantled. Minimum wage laws are being allowed to languish and more than ever fail to provide a living wage. Employment standard laws are not being enforced or are being cancelled. Right to work laws are replacing collective bargaining rights. Social security benefits are under attack. Public pensions are not keeping up with cost of living indexes. Private sector pensions are being compromised and, in many cases, disappearing. The tax laws have not only become more complex but they definitely favour the very rich. Taxes related to sources other than income are spreading and unfairly burden the middle class and are usually regressive. The very nature of employment has changed and employment has become less secure and earnings much more precarious.

The scholars who are writing about these things are saying is it any wonder we are seeing a growing wealth gap and an already significant wage gap across almost all elements of society?

The bottom line is that, according to this theory, less fear and uneasiness in society has led to a rise in individualism and away from a more collective approach to dealing with economic issues and this has been a major factor in sowing the seeds of wage inequality.

If one subscribes to this theory….and there are a number of valid arguments in support of the theory…..then tinkering at the edges with such things as the employment laws, the tax systems, etc. will not change the current mindset.

That leaves the question. Will it take another catastrophe or series of catastrophes to drive the much needed reforms to achieve more equality in society? Who knows?